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S-W Disappoints in Q1

Sherwin-Williams misses on EPS

2 May, 2024

Sherwin-Williams disappointed in its first-quarter results but reaffirmed guidance for the rest of the year.

As the largest painting company by far, Sherwin-Williams can be viewed as a barometer for the entire painting industry. The quarterly results suggest that the first quarter of the year was a bit bumpy, but that the rest of the year should hold steady in a depressed economy.

Analysts at Zacks predicted a consensus estimate of $2.25 per share for Sherwin-Williams. The company missed with Earnings Per Share (EPS) of $2.17. That’s off by -3.56%, which isn’t that bad all thing considered. But considering that Sherwin Williams has beat guidance three of the last four quarters, it was a rare miss for the company.

It also means that Sherwin-Williams is underperforming the broader market. The company’s shares traded at just under $300 at the time of this writing. In March, the shares traded at a high of $347. Overall, Sherwin-Williams stock lost about .9% of its value since the start of the year, while the broader S&P index is up 5.1%.

Stockholders may be disappointed, but painting contractors should be pleased to see that their industry was a bright spot in an otherwise lackluster report.

“We remain highly confident in our customer-focused strategy and are extremely well-positioned as the painting season begins,” said President and CEO Heidi Petz. “While uncertainties persist in the macroeconomic environment, we see growing opportunity, and we are encouraged by pro-architectural demand and sentiment in April.”

Looking at the individual parts of the business shows a bit of a mixed bag.

Paint Stores Group was up slightly, driven by a recent price increase that should reach fruition in the second quarter, the company reported. There was above-market growth in residential repaint and commercial.

Meanwhile, new residential dragged on results, which should be no surprise. Sales of houses have been locked up since mortgage rates crested 6.5% and regularly flirt with over 7%. That’s also likely what’s driving residential repaint, as customers who might otherwise be looking to upgrade are stuck in place and trying to spruce up their existing living space while they wait out the Federal Reserve and look toward ever-receding interest rate cuts to bring down mortgage rates.

Gains in income before tax were largely driven by raw material costs continuing to come back down to earth as supply chains and labor stabilizes from the COVID hangover.

Looking toward the next quarter, don’t expect a rapid rebound. Sherwin-Williams offered guidance of flat consolidated net sales with low-digit percentage growth as the upside. Longer term, Sherwin-Williams reaffirmed guidance for the rest of 2024, expecting sales to be up by low to mid-single digits, in the range of $10.05 to $10.55 net income per share.

The company will next report in July when it will deliver second-quarter results. The painting industry will be watching closely to see if the macroenvironment improves or if inflation persists and continues to impact sales and profit margins. 

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